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AFFINITY WATER INVESTOR PRESENTATION JANUARY 2013 Contents 1 BUSINESS OVERVIEW 3 2 BUSINESS PERFORMANCE 14 3 FINANCIAL STRUCTURE 20 4 APPENDIX 27 1 Executive summary Introducing Affinity Water Acquired in June 2012 by consortium led

SLIDE 1

AFFINITY WATER INVESTOR PRESENTATION

JANUARY 2013

SLIDE 2

1 BUSINESS OVERVIEW 3 2 BUSINESS PERFORMANCE 14 3 FINANCIAL STRUCTURE 20 4 APPENDIX 27

SLIDE 3

Executive summary

Richard Bienfait

CEO Affinity Water — Joined Veolia Water UK in 1997 as Group Financial Controller — Appointed CFO of Veolia Water UK in 2004 — Appointed CEO of Veolia Water Central in 2010 (now Affinity Water)

Duncan Bates

CFO Affinity Water — Joined Veolia Water UK in Jan 1992 — Appointed Group Financial Controller 1999 — Appointed CFO, Veolia Water UK Non‐Regulated business 2007 — Appointed CFO of Veolia Water Central in March 2012 (now Affinity Water) 2

— Acquired in June 2012 by consortium led by Infracapital and Morgan Stanley Infrastructure Partners (Transaction Value £1,236 million) — Three Operating companies unified under one licence, resulting in a combined RCV of £949.4 million (March 2012) — Rebranded Affinity Water (previously branded Veolia Water and prior to that Three Valleys Water) — New Class A / B secured debt platform established — Looking to issue Class A bonds, preliminarily rated A‐ / A3 (S&P/Moody’s), in both fixed rate and index‐linked form — Experienced management team

Introducing Affinity Water

SLIDE 4

BUSINESS OVERVIEW

SLIDE 5

Largest water only company by revenues and population served, with no material non regulated businesses

Regulated asset under single licence

— Operates as a regional monopoly — No material non regulated activity — Affinity Water has the latest Ofwat ring‐fence licence conditions — Following licence unification, RCV consolidated in one corporate entity

Established regulatory regime

— Primary statutory duty of the Regulator to ensure that efficient regulated companies can finance themselves — Recent Section 13 uncertainty effectively concluded — Established regulatory regime — Price regulation recently reinforced by Defra Draft Strategic Policy statement, November 2012

Robust operational performance

— Strong ranking on SIM performance metrics — Achieved “Stable” for Ofwat serviceability measure in 2011/12

Experienced management team

— Strong management team put in place as response to PR09 settlement — Management team retained by incoming shareholders to focus on continuing operational improvements — Firm focus on preparation for PR14

Simple financial structure

— 3 and 5 year bank debt currently in place on good terms — New platform broadly follows precedent financial structures — Very limited use of derivatives (no index linked swaps currently intended) — No external debt to service higher up the company structure 4

Business strengths

SLIDE 6

Ownership structure

— Infrastructure investors with long‐term investment horizon — Track record as strategic investors in a range of core infrastructure and utilities — Detailed knowledge of UK water sector — Previous 100% owner retaining stake — Capability sharing arrangements established to facilitate continued access to previously developed knowledge

Collaborative and financially well resourced shareholder group who support management initiatives

10%

Beryl Datura Investments Morgan Stanley Infrastructure Partners 40%

40% 10%

SLIDE 7

— This brought the entire RCV of the three previously separate businesses (Central / East / Southeast) under a single licence — Enables a more efficient group financing structure — Already realising operational efficiencies — Rebranding to Affinity Water complete with no adverse impact to operations or revenue cash flows

On 27 July 2012 three businesses were unified

Unification process completed

Affinity Water RCV £949.4m Affinity Water (Central Region) RCV £805.2m Affinity Water (East Region) RCV £65.8m Affinity Water (Southeast Region) RCV £78.4m

RCV as of 31st March 2012 based on 2011/12 financial year‐end prices

SLIDE 8

M1 M25 A1 M11 M40 M4 M3 M20

Our business operates in South East England

Source: Ofwat and company information. Figures as of 31st March 2012

Regulated water industry in England and Wales

7 Affinity Water (East Region)

Affinity Water (Central Region)

M20

— Combined revenues of £288 million – largest Water only Company by revenue — Combined EBITDA £159 million — Employs c. 897 people (with grand total of 1,167 including AWSS as at 31st Dec 2012) — Supplies a population of c. 3.49 million — Operates 16,500 km of water mains

Affinity Water

Affinity Water (Southeast Region)

Not to scale

Affinity Water area Other WoC area Water and Sewerage Company (WaSC) area

South Staffordshire Dee Valley United Utilities Severn Trent Yorkshire Cambridge Anglian Northumbrian South East Portsmouth Bournemouth & West Hampshire Bristol Cholderton & District South West Dwr Cymru (Welsh) Thames Northumbrian Wessex Sutton & East Surrey London Southern

1 3 2

SLIDE 9

The value chain of our business

Treatment Distribution Customer Abstraction Sunnymeads

(Iver intake)

Egham Walton Grafham

(not to scale)

Ardleigh Chertsey

Surface Water Abstraction Principal Boreholes River Thames Urban Areas

SLIDE 10

The value chain of our business

Iver (20%*) Egham (12%*) Chertsey (4%*) Walton (3%*) Clay Lane (13%*) North Mymms (3%*) Grafham (3%*)

(distance not to scale)

Ardleigh (20%*) Horsley Cross (80%*) Treatment Distribution Customer Abstraction

* Percent of maximum deployable output

Major Treatment Work (>40 Ml/day) Treatment Work (<40 Ml/day) Urban Areas

SLIDE 11

The value chain of our business

10 10

Treatment Distribution Customer Abstraction

Available Interconnection Point Trunk Network Urban Areas

Distribution Network

SLIDE 12

The value chain of our business

Treatment Distribution Customer Abstraction

Urban Areas Commercial Customers

SLIDE 13

WoC ranking by stated appointed revenues, £m (Year to March 2012)1 WoC Ranking by RCV, £m (March 2012) 2

Affinity Water is the largest WoC by revenues and population served

Source: Ofwat and companies’ regulatory accounts

1 Nominal values as of 31st March 2012 based on regulatory accounts 2 RCV as of 31st March 2012 based on 2011/12 financial year‐end prices

978 949 354 252 201 144 116 69 67 South East Affinity Water Bristol South Staffordshire Sutton & East Surrey Bournemouth &

W. Ham

Portsmouth Cambridge Dee Valley 289 196 108 88 57 42 37 22 21 Affinity Water South East Bristol South Staffordshire Sutton & East Surrey Bournemouth &

W. Ham

Portsmouth Dee Valley Cambridge

SLIDE 14

Water company Customer

* Statutory body representing consumer interests

Economic regulation Drinking water quality regulation Environmental regulation Price limits Drinking water standards Environmental permits Governmental regulation Consumer representation Legislative and policy framework Consumer protection

We have rebuilt a strong relationship with our regulators

SLIDE 15

BUSINESS PERFORMANCE

SLIDE 16

— Affinity Water received a challenging PR09 settlement: — Required improvements in operating efficiency; and — Awarded a high capex incentive scheme ratio

Vision and strategic priorities

Vision

The leading community‐focused Water Company

— New management team put in place to drive business performance following the final determination — This management team is supported by the company's new shareholders — A clear plan for improving efficiency has been put in place since 2010 and significant progress has been made in improving performance

PR09 Settlement Resulting actions by company following PR09

Demonstrate great Asset Management

Provide a highly‐visible Customer Experience

Develop a team‐based, collaborative organisation delivering commercial performance

Apply proven technology to drive effectiveness and efficiency

Obtain a favourable AMP6 Determination

Strategic priorities

SLIDE 17

Affinity Water management is executing its plan

2010 2011 2012

Asset Management

Achieved Leakage target 2010/11 Implemented Well‐Defined Needs process to

ptimise capex over AMP5

SIM performance improvement – in 2010/11 and 2011/12 Best Ever Water Quality Performance in its history Leakage c.15% below Ofwat target 2011/12 Serviceability, Burst rate reduced by c.15% £5.5m annual savings

Achieved “Stable” for Ofwat serviceability measure in 2011/12

—

Establish Community Operations to improve control and effectiveness

—

Review 23 customer facing business processes Customer experience

—

Control of the money

—

Control of the assets

Head count reduction – 40 FTE Contractor reduction July 27th, unification of the regulated businesses Procurement savings

Source: Company analysis

SLIDE 18

Regulatory Revenues and allowance Opex and allowance Capex and allowance

£m (2007/ 2008 prices) £m (07/08 prices)

Regulatory Revenues Opex Capex

Year

2010/2011 2011/2012 2010/2011 2011/2012 2010/2011 2011/2012

Ofwat Allowance

257 256 126 122 77 85

Outturn

254 254 135 126 75 90

Surplus / (Deficit)

(3) (2) (9) (4) 2 (5)

Comment

Small under‐recovery of revenue so far in AMP5 primarily due to lower volumes Affinity Water achieved £5.5m efficiencies in 2011/12 The capex plan has met all key regulatory

utputs to date in AMP5

AMP5 Performance to date

Source: Company analysis, regulatory accounts

17 Key

Outturn Ofwat Allowance

40 80 120 160 200 240 280 2010/2011 2011/2012 40 80 120 160 200 240 280 2010/2011 2011/2012 40 80 120 160 200 240 280 2010/2011 2011/2012

SLIDE 19

SIM scores

— Initiatives have been implemented — Introduction of self‐managed teams — Careful collection and analysis of customer feedback to further improve processes — Speech analytics — Net Promoter Score — Current score achieved should significantly de‐risk the SIM penalty/reward for AMP6 — Looking to optimise the SIM score at the right price

AMP5 SIM Performance

Source: Company publications * Weighted average by number of customers

79.7 56.2 62.6 64.6 65.0 66.9 67.0 69.9 70.4 77.0 77.7 77.7 78.0 78.1 78.6 83.0 84.0 84.1 84.7 85.1 85.4 78.2 20 40 60 80 100 Wessex Bristol Sembcorp Bournemouth AW East South Staffs Cambridge AW South East Anglian AW (Aggregated) Northumbrian Welsh Water AW Central Yorkshire Sutton & East Surrey Dee Valley Severn Trent United Utilities South West Southern Portsmouth Thames South East SIM score (out of 100) SIM score 2011/12 SIM score 2011/12 (*Aggregated) |X

SLIDE 20

Key success factors for PR14

Successful PR14

utcome

Continue to improve regulatory performance Understand and adapt to regulatory developments Increase efficiency rankings Articulate robust plan and supporting data Demonstrate great asset management Maintain strong relationships with regulator and other stakeholders

SLIDE 21

FINANCIAL STRUCTURE

SLIDE 22

— Class A / B debt structure in line with UK water sector precedents — Company strategy, supported by shareholders, to target total leverage

f 80% Net Debt/RCV

— £680m Class A (70% of RCV), preliminarily rated A‐ / A3 (S&P/Moody’s) — £95m Class B (10% of RCV), preliminarily rated BBB / Baa3 (S&P/Moody’s) — Existing £200m 5.875% 2026 bond retained and migrated as Class A as envisaged in flipper language — £70m capex facility and £30m working capital facility to fund ongoing financing needs, plus liquidity facilities — We intend to issue long term fixed rate and long term index linked Class A bonds — Medium term bank debt gives flexibility over quantum and timing of issuance — Commitment letter signed for entire Class B in long term index linked form — No intention to use significant derivatives going forward — Recent Extraordinary Resolution for Existing Bonds means Deutsche Trustee will act for both Existing Bonds and New Bonds

Corporate and financial structure

AWCF AWHL AWE AWSE AWSS AWL Existing Bank Debt New Bonds

Financial / security ring‐fence

Security Trustee

Full fixed and floating security Includes pledge over shares in AWL

21 AWF (2004) AWPFL Existing Bond

SLIDE 23

— Affinity Water currently exhibits a very low business risk, underpinned by relatively stable and predictable cashflows under a well established and transparent regulatory regime — The rating is in line with... Anglian Water, Thames Water and Yorkshire Water — The company has already achieved a saving of close to £6 million (in 2007/08 prices) in 2010/11 — Capital expenditure performance has historically been strong with regulatory outputs provided within the capital allowances set by Ofwat — The CTA includes a Senior RAR Restructuring Event... This transaction can be considered in a slightly stronger position compared to precedents, in that it would be able to react with a set and controlled mechanism to regulatory change — Affinity Water’s management has a track record of limited derivative use... The company will follow a prudent treasury policy

Rating agency feedback

Class A preliminary rating: A3 Class B preliminary rating: Baa3 Class A preliminary rating: A‐ Class B preliminary rating: BBB

— Excellent business risk profile on the back of low‐risk regulated regional monopoly water supply business — Limited new borrowing needs stemming from AWL’s neutral to slightly positive free operating cashflow generation – unlike most rated peers — Corporate structure is similar to other UK regulated utility transactions — Positively, we note that AWL has made a number of operational improvements in the first two years of the regulatory period — We anticipate that Affinity Water will maintain adjusted debt to RCV

f about 80%... Which allows for some headroom under securitization

trigger events — Affinity Water performs robustly under our sensitivities

Source: Standard & Poor’s “Presale: Affinity Water Programme Finance Ltd.” dated January 18th 2013 Moody’s “Pre‐Sale Report – Affinity Water Limited” dated January 18th 2013

SLIDE 24

Structural protections are included to minimise both financial risk and event risk

Key structural protections

Common documentation

—

All secured creditors will enter into Common Terms Agreement and Security Trust and Intercreditor Deed

—

No independent rights of enforcement Security package

—

Full fixed and floating security (to the extent permitted by the Water Industry Act) including share pledge in respect of Affinity Water Limited shares

—

Given Water Industry Act restrictions, share pledge provides credible exit by selling the whole business

—

Defensive security through negative pledge and full fixed and floating security

—

Secured creditors will agree to an 18 month automatic standstill which pre‐empts special administration and creates secured creditor moratorium for work‐out Ring‐fencing of the regulated business

—

Segregated from any material non regulated businesses

—

Capable of operating on a standalone basis and not reliant on

ther parties

—

Not subject to liabilities of any other party Operational covenants

—

Restrictions on business undertaken

—

Restrictions on acquisitions and disposals

—

Operated in a prudent matter in line with good industry practice Cash management

—

Control over business cashflow

—

Waterfall of payments in standstill scenario Tax risk

—

Tax deed of covenant provides tax ring‐fencing and protects regulated business from secondary liabilities and tax charges

—

Potential de‐grouping charge if enforcement within 6 years

Trigger events

—

Early warning without default

—

Protection against both financial, operational and regulatory risk:

—

RAR and Adjusted ICR ratios outside certain levels

—

Failure to maintain satisfactory liquidity

—

Drawdown on liquidity

—

Rating downgrade Class A to BBB/Baa2 or below by two rating agencies

—

Consequences of trigger event:

—

Distribution lock up

—

Increased information requirements

—

Remedial action plan

—

Security Trustee appointed review, dialogue with OFWAT Liquidity

—

Committed liquidity facilities or reserves to cover:

—

12 months debt service

—

10% of next 12 months operating and capital maintenance costs Refinancing risk

—

Limit on concentration of maturities:

—

Maximum of 20% of RCV or £250m in debt maturities to fall in any 2 year period, maximum 40% of RCV in debt maturities in any 5 year period Hedging policy

—

Prudent treasury management policy with interest rate and currency risk managed with eligible counterparties Covenants

—

Financial covenants – ICR, adjusted ICR and Net Debt/RCV:

—

Limits on additional indebtedness

—

Events of default

—

Other general covenants as follows:

—

Information for creditors

—

Maintenance of rating

—

Restrictions on type of business operations

—

Minimum number of Independent Directors

SLIDE 25

Financial ratio underperformance results in a distribution block to ensure additional liquidity retained Creditors protected by financial ratios covering both leverage and liquidity Interest ratios calculated on both a forward and backward looking basis to ensure potential cashflow issues are detected early

Lock‐up and default regime

Trigger Event – no distributions to be made Event of Default – standstill/ enforcement Class A adj. ICR Class A adj. ICR < 1.0x Class A adj. ICR < 1.30x Senior Adj. ICR Senior adj. ICR < 1.10x Class A RAR Class A RAR > 75% Senior RAR Senior RAR > 85%2 Senior RAR > 95%1 Class A average adj. ICR Class A average adj. ICR < 1.40x Senior average adj. ICR Senior average Adj. ICR < 1.20x Class A ICR < 1.60x n/a Class A ICR In line with all precedent transactions

1. If caused by a change in price control mechanism which removes significant RCV, this will be a trigger event rather

than EoD for 12 months 2. Restricted payment condition at 85%, trigger event at 90%

SLIDE 26

— Regular interaction and two‐way dialogue with investors and bank credit analysts covering Affinity Water — Group or one‐on‐one meetings with long term investors at least every c.18 months — Commitment to providing additional tailored investor report semi‐annually covering — Key financial metrics — Operational update — Dedicated Investor Relations section to be accessible on the Affinity Water website containing — Financial calendar ‐ incorporating non‐financial items such as key regulatory dates and other company‐specific dates, — Both regulatory and statutory accounts — Investor reports — Debt information — RNS feed — Prospectus and other key documentation — Contact information

Ongoing commitment to investor engagement

SLIDE 27

Next steps

Public bond issuance in Q1 – Indicative Terms

Issuer Affinity Water Programme Finance Limited Issuance Size Multi‐tranche ‐ up to £480m Guarantors Affinity Water Holdings Limited, Affinity Water Limited, and Affinity Water Finance (2004) Limited Coupon Type(s) Fixed rate, and Index Linked Currency Sterling Maturity Profile Bullet Tenor Long Dated Series Class A Ratings Preliminarily A‐ / A3 (S&P / Moody’s) Listing London Minimum Denominations £100,000 + £1,000 Use of Proceeds Refinancing of acquisition facilities and general corporate purposes

— Looking to issue up to £480m in Class A debt; preliminary rating A3 Moody’s and A‐ S&P — Looking to issue a mix of long term fixed and index linked bonds — We would be grateful for feedback on index linked appetite and maturity preference

SLIDE 28

Glossary

SLIDE 29

Summary of abbreviations used in the presentation

Glossary

Abbreviation Title Description

AWCF Affinity Water Capital Funds Limited — Private company incorporated with limited liability in England and Wales — Owner of the group AWL Affinity Water Limited — The sole Appointed Business Licence holder — The Company — The Operating Company — Formerly called Three Valleys Water and Veolia Water Central — Following unification in July 2012, includes the Appointed business of Veolia Water East and Veolia Water Southeast — Guarantor AWHL Affinity Water Holdings Limited — A wholly‐owned subsidiary of AWCF — Guarantor AWPFL Affinity Water Programme Finance Limited — the Programme Issuer, the issuing entity AWE Affinity Water East — Shell entity — Formerly called Tendring Hundred Water and Veolia Water East AWSE Affinity Water Southeast — Shell entity — Formerly called Folkestone & Dover Water and Veolia Water Southeast AWSS Affinity Water Shared Services — Formerly called Veolia Water Shared Services AWF(2004) Affinity Water Finance (2004) Limited — Existing issuer — A wholly‐owned subsidiary of AWL — Guarantor 28

SLIDE 30

Disclaimer

By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations: — This document, which has been prepared by Affinity Water Limited (the “Company”), comprises slides for a presentation in relation to the Company and its affiliates, including without limitation, Affinity Water Southeast Limited and Affinity Water East Limited (the “Group”) prepared solely for use at a presentation to be held in connection with the proposed establishment of Affinity Water Programme Finance Limited’s £2.5 billion, multicurrency programme for the proposed issuance (the “Offering”) of guaranteed bonds (the “Securities”) financing the Company. This document is not an offering document (and will not be registered as such in any jurisdiction), nor does it constitute or form part of any offer or invitation to purchase, sell or subscribe for, or any solicitation of any such offer to purchase, sell or subscribe for, any securities in any member of the Group in any jurisdiction nor shall this document (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with, or act as an inducement to enter into, any contract

r commitment whatsoever with respect to any securities of any member of the Group or otherwise and shall not form the basis of any contract or commitment whatsoever. This document does not constitute a recommendation regarding the securities of any member
f the Group.

— The document is being made available for information purposes only and the information in the document reflects prevailing conditions and our judgment as at the date of the document. The information contained in this document is subject to change based upon a number of factors, including, without limitation, regulatory, business, economic and other factors and market conditions. The information and opinions contained in this document are based on general information gathered at the time of writing, are subject to change without notice and have not been formally verified by the Company or any member of the Group. The Company relies on information obtained from sources believed to be reliable but does not guarantee its accuracy or completeness. In giving this presentation, neither the Company nor its respective advisers and/or agents undertake any obligation to provide the recipient with access to any additional information or to update this presentation or any additional information or to correct any inaccuracies in any such information which may become apparent. — None of the Company nor any of its shareholders, directors, officers or employees nor the Managers nor any of their shareholders, affiliates (within the meaning of Rule 405 under the U.S. Securities Act of 1933, as amended (the "Securities Act")), directors, officers or employees nor any other person accepts any liability (in negligence or otherwise) whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. — Investors and prospective investors in the Securities of the Company are required to make their own independent investigation and appraisal of the business and financial condition of the Company and the nature of the Securities. Any decision to purchase Securities in the context of the proposed Offering, if any, should be made solely on the basis of information contained in an offering circular or prospectus published in relation to such Offering. No reliance may be placed for any purpose whatsoever on the information contained in this presentation, or any other material discussed verbally, or on its completeness, accuracy or fairness. This presentation does not constitute a recommendation regarding the Securities of the Company. — No reliance may be placed for any purpose whatsoever on the completeness, accuracy or fairness of the information contained in this document. No representation or warranty, express or implied, is given by or on behalf of the Company or any of its affiliates or shareholders or any of their respective directors, officers or employees or any other person as to the accuracy or completeness of the information or opinions contained in this document and, save in the case of fraud, no liability whatsoever is accepted by the Company

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